Oil rally lifts Wall Street, extending tight correlation

(Reuters) - U.S. stocks rose in low volume on Wednesday, led once more by the direction of the price of oil and energy sector shares.

Crude oil and U.S. equity prices have been linked for much of 2016 to a degree that has surprised many investors. Wednesday’s market action extended that trend, with WTI crude CLc1 rising nearly 5 percent and the S&P 500 energy sector .SPNY up 1.5 percent. Chevron (CVX.N) jumped 4.6 percent to $92.82 and gave the biggest boost to the energy sector.

“It’s not about oil being a barometer of the global economy,” said Art Hogan, chief market strategist at Wunderlich Securities in New York. “A lot of it has to do with psychology.”

U.S. crude and the S&P 500 have been directionally correlated on all but six trading days this year, according to Wunderlich data.

“Stability in that asset class (oil) for a period of time will allow for the correlation to break down,” said Hogan.

Since Feb. 11, the S&P 500 has gained 8.8 percent, but it is still down 2.7 percent for the year.